Consider the following income tax footnote information for Oracle for the fiscal year ended May 31,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the following income tax footnote information for Oracle for the fiscal year ended May 31, 2019 (fiscal year 2019). The following is a geographical breakdown of income before the provision for income taxes: Year Ended May 31 (in millions) 2018 2017 2019 $ 3,774 $ 3,366 9,058 $ 3,674 Domestic... Foreign.... 8,494 8,006 Income before provision for income taxes . $12,268 $12,424 $11,680 The provision for income taxes consisted of the following: Year Ended May 31 ($ in millions) 2019 2018 2017 Current provision: Federal... $ 979 $ 936 $8,320 264 1,100 State... 300 257 Foreign. . Total current provision .. 1,097 1,475 $2,376 $9,684 $2,668 Deferred benefit: Federal. . State. .. Foreign.. $ (158) (29) (253) $ 483 $ (827) (26) (28) (1,646) Total deferred benefit.. Total provision for income taxes... $(1,191) $ (847) $ (440) $ 1,185 $8,837 $2,228 The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows: The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows: Year Ended May 31 ($ in millions) 2019 2018 2017 U.S. federal statutory tax rate.. Tax provision at statutory rate Impact of the Tax Act of 2017: One-time transition tax.. 21.0% 29.2% 35.0% $2,576 $3,629 $4,088 (529) 7,781 Deferred tax effects.. Foreign earnings at other than United States rates State tax expense, net of federal benefit...... Settlements and releases from judicial decisions and statute expirations, net... . Domestic production activity deduction Federal research and development credit Stock-based compensation Other, net.... 140 (911) (995) (789) (1,312) 197 142 150 (189) (119) (127) (149) (132) (252) (87) (174) (302) - (158) (201) 81 6 (114) Total provision for income taxes. $1,185 $8,837 $2,228 continued The components of our deferred tax assets and liabilities were as follows: May 31 (in millions) 2019 2018 Deferred tax assets: Accruals and allowances. $ 541 $ 567 Employee compensation and benefits. Differences in timing of revenue recognition. Basis of property, plant and equipment and intangible assets. Tax credit and net operating loss carryforwards 646 664 322 338 1,238 3,717 2,614 Total deferred tax assets. 6,464 4,183 Valuation allowance.... (1,266) (1,308) Total deferred tax assets, net. 5,198 2,875 Deferred tax liabilities: Unrealized gain on stock Acquired intangible assets. GILTI deferred . (78) (973) (1,515) (78) (1,254) Basis of property, plant and equipment and intangible assets.. Other. (158) (48) (200) Total deferred tax liabilities.. (2,766) (1,538) Net deferred tax assets $2,432 $1,337 Required a. What is the total amount of income tax expense that Oracle reports in its fiscal 2019 income state- ment? What portion of this expense did Oracle pay during 2019 or expect to pay in 2020? b. Explain how the deferred tax liability called "Acquired intangible assets" arises. Under what cir- cumstances will the company settle this liability? Under what circumstances might this liability be deferred indefinitely? e, Explain how the deferred tax asset called "Employee compensation and benefits" arises. Why is it recognized as an asset? d. Explain how the deferred tax asset called "Tax credit and net operating loss carryforwards" arises. Under what circumstances will Oracle realize the benefits of this asset? e. Oracle reports a 2019 valuation allowance of $1,266 million. How does this valuation allowance arise? How did the change in valuation allowance for 2019 affect net income? Valuation allowances typically relate to questions about the realizability of tax loss carryforwards. Under what circum- stances might Oracle not realize the benefits of its tax loss carryforwards? f. Calculate Oracle's effective (average) tax rate for each year. g. Oracle reconciles the difference between its total provision for income tax and the statutory rate. What item explains most of the difference in fiscal 2017 compared to fiscal 2018? h. If not for the effects of the Tax Cuts and Jobs Act of 2017, what would have been Oracle's effective tax rate each year? Consider the following income tax footnote information for Oracle for the fiscal year ended May 31, 2019 (fiscal year 2019). The following is a geographical breakdown of income before the provision for income taxes: Year Ended May 31 (in millions) 2018 2017 2019 $ 3,774 $ 3,366 9,058 $ 3,674 Domestic... Foreign.... 8,494 8,006 Income before provision for income taxes . $12,268 $12,424 $11,680 The provision for income taxes consisted of the following: Year Ended May 31 ($ in millions) 2019 2018 2017 Current provision: Federal... $ 979 $ 936 $8,320 264 1,100 State... 300 257 Foreign. . Total current provision .. 1,097 1,475 $2,376 $9,684 $2,668 Deferred benefit: Federal. . State. .. Foreign.. $ (158) (29) (253) $ 483 $ (827) (26) (28) (1,646) Total deferred benefit.. Total provision for income taxes... $(1,191) $ (847) $ (440) $ 1,185 $8,837 $2,228 The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows: The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows: Year Ended May 31 ($ in millions) 2019 2018 2017 U.S. federal statutory tax rate.. Tax provision at statutory rate Impact of the Tax Act of 2017: One-time transition tax.. 21.0% 29.2% 35.0% $2,576 $3,629 $4,088 (529) 7,781 Deferred tax effects.. Foreign earnings at other than United States rates State tax expense, net of federal benefit...... Settlements and releases from judicial decisions and statute expirations, net... . Domestic production activity deduction Federal research and development credit Stock-based compensation Other, net.... 140 (911) (995) (789) (1,312) 197 142 150 (189) (119) (127) (149) (132) (252) (87) (174) (302) - (158) (201) 81 6 (114) Total provision for income taxes. $1,185 $8,837 $2,228 continued The components of our deferred tax assets and liabilities were as follows: May 31 (in millions) 2019 2018 Deferred tax assets: Accruals and allowances. $ 541 $ 567 Employee compensation and benefits. Differences in timing of revenue recognition. Basis of property, plant and equipment and intangible assets. Tax credit and net operating loss carryforwards 646 664 322 338 1,238 3,717 2,614 Total deferred tax assets. 6,464 4,183 Valuation allowance.... (1,266) (1,308) Total deferred tax assets, net. 5,198 2,875 Deferred tax liabilities: Unrealized gain on stock Acquired intangible assets. GILTI deferred . (78) (973) (1,515) (78) (1,254) Basis of property, plant and equipment and intangible assets.. Other. (158) (48) (200) Total deferred tax liabilities.. (2,766) (1,538) Net deferred tax assets $2,432 $1,337 Required a. What is the total amount of income tax expense that Oracle reports in its fiscal 2019 income state- ment? What portion of this expense did Oracle pay during 2019 or expect to pay in 2020? b. Explain how the deferred tax liability called "Acquired intangible assets" arises. Under what cir- cumstances will the company settle this liability? Under what circumstances might this liability be deferred indefinitely? e, Explain how the deferred tax asset called "Employee compensation and benefits" arises. Why is it recognized as an asset? d. Explain how the deferred tax asset called "Tax credit and net operating loss carryforwards" arises. Under what circumstances will Oracle realize the benefits of this asset? e. Oracle reports a 2019 valuation allowance of $1,266 million. How does this valuation allowance arise? How did the change in valuation allowance for 2019 affect net income? Valuation allowances typically relate to questions about the realizability of tax loss carryforwards. Under what circum- stances might Oracle not realize the benefits of its tax loss carryforwards? f. Calculate Oracle's effective (average) tax rate for each year. g. Oracle reconciles the difference between its total provision for income tax and the statutory rate. What item explains most of the difference in fiscal 2017 compared to fiscal 2018? h. If not for the effects of the Tax Cuts and Jobs Act of 2017, what would have been Oracle's effective tax rate each year?
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
The following represents the financial information for Trovatore Corporation, a manufacturer of electronic components, for two months: Required a. Classify these items into prevention (P), appraisal...
-
The following is selected financial information for Lee Incorporated: Required a. Calculate the return on equity for Lee Incorporated for 2012 and 2011. Round percentages to one decimal point (i.e.,...
-
The following is net asset information for the Dhillon Division of Klaus, Inc.: The purpose of the Dhillon Division (also identified as a reporting unit or cash-generating unit) is to develop a...
-
For the attractive-nuisance doctrine to apply, the possessor need not be aware that children are likely to trespass on his land or have reason to know that the condition poses an unreasonable risk of...
-
Clocky is a commitment device to help overcome time inconsistency. Which of the following are the time periods over which someone might have inconsistent preferences and need Clockys help? a. Between...
-
For the following exercises, determine whether the functions are one-to-one. f(x) = 3 x + 5
-
What qualifies as a short-term lease and how would a lessee account for a short-term lease?
-
ABC Company manufactures and sells software packages to small businesses. The company has enjoyed great success since it began business in 1998. Last year, the firm doubled its revenues, and its...
-
Hi, Please answer the following question. Thanks! Question 3 During the past five years, you owned Stock ABC and Stock ZYX that had the following annual rates of return: Year ABC ZYX 0.15 0.01 -0.23...
-
Refer to the Big Rig Rental Company case. Design a spreadsheet that will allow the firm to determine the Net Present Value of cash flows over the five-year period. The following exercises refer to...
-
Bert Greenwood bought a new vending machine for his business on 1 January 20-/ at a cost of 00. He intends to write off depreciation of the machine at the end of each business year which is 31 ember....
-
Amidst the burgeoning complexity of contemporary business landscapes, how do advanced organizations employ sophisticated design principles and ergonomic considerations to optimize physical workspaces...
-
You have decided to purchase a small industrial warehouse. The purchase price is $1 million, and you expect to hold the property for five years. You have narrowed your choice of debt financing to...
-
What did the Emancipation Proclamation do, and how did it alter the Civil War? https://youtu.be/Byh-HityBIM?si=rxNOvngdGWqHGrwZ In this module you read and watched lots regarding the history of...
-
a. The finished goods inventory on hand at the end of each month must equal 4,000 units of Supermix plus 25% of the next month's sales. The finished goods inventory on June 30 is budgeted to be...
-
Assist Stakeholders in Developing, Implementing, and Sustaining the Program Vision following the information provided. Use the template below. Program name: Lombra second venue opening Prepared by:...
-
Hello, Can I please have assistance with this particularquestion and also an explanation? Thank you! At the beginning of 2016 , Better Corp.'s accounting records had the following general edger...
-
a. What is meant by the term tax haven? b. What are the desired characteristics for a country if it expects to be used as a tax haven? c. What are the advantages leading an MNE to use a tax haven...
-
Ford Motor Company is an internationally known manufacturer of automobiles and trucks. The company recently lost over $12 billion in a single year of operations. Despite that staggering loss, the...
-
Preparing Both an Income Statement and a Balance Sheet from a Trial Balance Jordan Sales Company (organized as a corporation on April 1, 2011) has completed the accounting cycle for the second year,...
-
As part of a major renovation at the beginning of the year, Scheffers Pharmacy, Inc., sold shelving units (store fixtures) that were 10 years old for $1,800 cash. The original cost of the shelves was...
-
On the Internet, find sites describing examples of the bill-and-hold technique.
-
Search the Internet for Thomas M. Coughlin, former Wal-Mart vice-chairman. What was he accused of in April 2005? What was his annual compensation in 2004?
-
Search the Internet for the improper transactions incurred by the A.I.G. What happened to the chairman Maurice R. Greenberg?
Study smarter with the SolutionInn App